You're safer from rogue traders and faulty goods when you buy on credit.
If you buy something for more than £100 on credit – whether it's financed in-store, on a credit card, or with a personal loan – the lender becomes jointly liable to refund you if something goes wrong.
If the lender doesn't help you, you can complain to the free Financial Ombudsman Service (FOS). If the FOS rules in your favour, it can force the lender to compensate you. If it rules against you, there are no consequences for you.
Hence, using a credit card makes sense for bigger purchases, particularly if you pay the bill off immediately or get an interest-free deal, so that the protection is completely free.
The FOS frequently releases case studies for us journalists to make plain and help you understand what claims are likely to be accepted. Today I'm going to look at some complaints involving furniture and the home, which make clear just why using credit for purchasing furniture is a good idea.
Mr and Mrs B's new kitchen
A specialist kitchen firm attempted to fit a kitchen for Mr and Mrs B, but there were numerous problems. Four attempts to replace the worktops failed, and several other flaws were not fixed.
The couple had arranged a loan through the kitchen firm. The couple used their rights to complain to the lender, but the lender rejected their complaint after being told by the kitchen firm that the kitchen “was satisfactorily supplied and fitted”.
The couple got an independent inspection report and complained to the FOS. The report concluded that “completely replacing the kitchen” was “the most cost-effective remedy at this stage”.
Although the lender responded that the kitchen firm were willing to remedy the situation for free, the FOS agreed with the B's that the supplier had been given ample opportunity to make good its errors. The FOS told the lender to:
- Refund every loan repayment the couple had made, plus interest.
- Cancel the remaining loan at no cost to the couple.
- Cover the costs of removing the kitchen and putting right any resulting damage.
Mrs C's unsafe sofa-bed
Two months after Mrs C bought a sofa-bed, she read in a newspaper that it did not meet health and safety requirements. She wanted to complain to the shop, but it was no longer in business.
Mrs C had been paying for the furniture with a point-of-sale loan, so she contacted the lender, enclosing a copy of the article and asking for her money back. The lender responded that this was not enough evidence, so Mrs C complained to the FOS.
The FOS contacted the newspaper and got a copy of a report from an independent expert, which it showed to the lender. As a result, the lender offered to cancel the loan, refund the payments she had made, and arrange to have the sofa removed and disposed of.
Mrs L's motley bedside tables
[SPOTLIGHT]Mrs L bought two tables of identical style from a catalogue company, paying for them by credit card. Photos in the catalogue showed two identical tables together, complementing each other.
However, the tables which were delivered were considerably different in appearance, with one being a much darker shade of wood than the other. The supplier refused a refund, saying the tables were not sold as a set. Mrs L complained to her credit-card company, who sided with the supplier, so she complained to the FOS.
Mrs L sent the FOS plenty of photos and the catalogue she had used. Given that the catalogue pictured the tables as a set, the FOS considered this a breach of contract. It ordered the credit-card company to refund the cost of the furniture and the interest charged, and said it should arrange to have the tables collected from her home.
Complaints that failed
You have to use your common sense, and there's not much point trying it on, as is revealed when you read about complaints that the FOS has rejected. Mrs D's experience, for example, shows that you can't necessarily blame the lender for “irresponsible lending” when you borrow for home improvements and then can't afford repayments.
If you try to get a refund because furniture you bought on credit at a local store doesn't fit in your home, like Mr V did, your complaint is likely to be rejected too. However, if you ordered through a catalogue, over the telephone or online, you should have seven days from receipt of the goods to cancel the order for any reason whatsoever, under distance-selling laws.
How to go about complaining
Keep copies of all your small-print and correspondence with lenders, in case you ever need to complain. If you complain to the lender about faulty goods or breach of contract from a supplier, write that the complaint is “under section 75 of the Consumer Credit Act 1974”. If the lender fails to help, complain to the Ombudsman, which has guidance on how to do so here.
If you're unhappy with the Ombudsman's decision, you can ask for a review. If you're still not happy, you still have the right to take the supplier or lender to court.
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